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Another crypto pyramid is about to fall: SEC charges 11 individuals over $300 million Ponzi scheme

The Securities and Exchange Commission (SEC) alleges crypto platform Forsage is a fraud

Ponzi scheme

Another crypto pyramid is about to fall: SEC charges 11 individuals over $300 million Ponzi scheme. Source: pexels.com

SEC filed the claim in the US District Court in Illinois on Monday, alleging that the founders and promoters of the platform used the fraudulent Ponzi scheme to raise more than $300 million from “millions of retail investors worldwide.”

Those charged include the four founders of Forsage, who were last known to be living in Russia, the Republic of Georgia, and Indonesia, as well as seven U.S.-based promoters. 

The SEC complaint states that Forsage platform was functioning as a “typical Ponzi structure”. Namely, participants would be financially rewarded by recruiting new investors to the platform. Despite two previous cease-and-desist actions against Forsage in 2020 and 2021, the defendants allegedly continued to promote the scheme while denying the claims in several YouTube videos and by other means.

According to the SEC, Forsage’s alleged Ponzi scheme lures new investors to set up a crypto-asset wallet and purchase “slots” from Forsage’s smart contracts. The slots would then give them the right to earn compensation from the new recruits aka “downlines”. Another compensation comes from the community of Forsage investors in the form of profit sharing, referred to as “spillovers.”

These efforts enabled the Ponzi structure to gain the massive scale over the last two years. Approximate amount of investitions attracted equals $300 million. 

Without admitting or denying the allegations, two of the defendants agreed to settle the charges and to permanently refrain from future violations of the charged provisions and certain other activities. 

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Nina Bobro

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https://payspacemagazine.com/

Nina is passionate about financial technologies and environmental issues, reporting on the industry news and the most exciting projects that build their offerings around the intersection of fintech and sustainability.